Puzzle Financial Advice Pty Ltd - What is Good Financial Advice?

What is GOOD ADVICE? What is good investment advice?

The law in Australia characterises the key elements and principles of good advice very well.

What are the key tests?

  • The common law requirements re negligence, misleading and deceptive conduct, due care.
  • Corporations Law requirement that there was a reasonable basis for the advice AND the advice was reasonable in the circumstances. S945A.
  • Corporations Law requirement that SoA was “clear, concise and effective” s947B(6)
  • Corporations Law requirement "do all things necessary to ensure that the financial services covered by the licence are provided efficiently, honestly and fairly" s912A(1)(a).
  • The ASIC Act 2001 – Misleading or deceptive conduct. Section 12DA.
  • The ASIC Act 2001 – False or misleading representations. Section 12DB.
  • The ASIC Act 2001 – Requirements to apply due care and skill, and that advice is fit for the purpose. Section 12ED.
  • PLUS disclosure of commissions and information that might influence the advice, as required under FSRA – helping consumers make informed decisions and helping consumers recognise conflicted advice.
  • PLUS disclosure of any associations or relationships between the providing entity, any employer of the providing entity, the authorising licensee or any of the authorising licensees, or any associate of any of those persons, and the issuers of any financial products that might reasonably be expected to be or have been capable of influencing the providing entity in providing the advice

    Supplementary tests?

  • Is the advice likely to cause damage to the client?
  • Are the fees and costs disproportionate to the likely benefit?
  • Was the advisor & AFS Licensee seeking to act in the best interests of the client?
  • Is the advisor providing advice that, if he/she was in the same position as the client, that he/she would feel happy to take?


  • “We should be careful and discriminating in all the advice we give. We should be especially careful in giving advice that we would not think of following ourselves. Most of all, we ought to avoid giving counsel which we don't follow when it damages those who take us at our word.” Adlai Stevenson

    "The type of economy we are dealing with at this particular stage is, I suspect, one that none of us have seen before, and indeed it may be unprecedented in history."
    Alan Greenspan in US Senate Banking Committee report 23rd February 2000 as reported on CNNfn.